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Archive for the ‘Enlightened Self-Interest’ Category

As policymakers look over the fiscal cliff, one can hope that their eyes fix on Afghanistan, the seemingly endless experiment in nation building. I understand that no president wants to seem the inevitable occur on his shift (consider the “optics”), but I sometimes wonder how many people would notice.  I gave a lecture on the war the other day in an introductory course and asked the students (who presumably read the assigned readings) to write down how many members of the US military had been killed in Afghanistan and report their estimates. The responses ranged from 268 to 6000, with only a  fifth of the class landing within a thousand of the correct number.

My students—at a university that is renowned for its culture of left activism—seemed relatively untroubled by their ignorance. Having a son in the Marines–a machine gunner who has not deployed–I was interested in how they would explain their lack of knowledge. Some representative comments:

  • “Its so far away.”
  • “It started when we were in grade school so we never really pay attention any more.”
  • “There is no draft so it really doesn’t impact us.”

There is an interesting piece (NYT)  for the handful of people who still pay attention to the war in Afghanistan.  It reviews some of the findings from the DOD’s “Report on Progress Toward Security and Stability in Afghanistan,” something is issues twice a year (the full report can be found here). Some takeaways:

  • Only one of the Afghan National Army’s 23 brigades is able to operate independently without support from the US or NATO
  • Violence in Afghanistan is “higher than it was before the surge of American forces into the country two years ago”
  • Insider attacks by Afghan security forces is a growing problem
  • Corruption remains rampant in the Afghan government
  • Pakistan continues to provide support for insurgents [Note: Pakistan received almost $3 billion in US aid in 2012, about $1.6 billion for security]

This is not to say that we have not accomplished anything of value  (one of my friends, a former Marine who spent a year in Afghanistan, can make a rather passionate case that we are doing much good, although he remains confident that things will return to the original position as soon as we exit).

Of course, although we appear to be facing some serious problems in getting a constitutional democracy to grow in Afghanistan, there is one thing that is growing quite well: opium. As Alissa Rubin reports (NYT): Under the watchful eye of NATO, Afghanistan has once again assumed its role as the “world’s largest producer of opium… harvesting about 80 percent of the world supply.” The Taliban used to ban opium. Now it has learned that it is far better to tax the opium crop. (“The Afghan counternarcotics minister, Zarar Ahmad Muqbil, estimated that the Taliban made at least $155 million from the poppy crop in 2012, and perhaps considerably more”). It is hard to imagine that the Taliban is going anywhere soon, with a steady stream of resources and an ineffective Afghan Army.

We are scheduled to “leave” Afghanistan in 2014. By leave, of course, we don’t really mean “leave” since some number of troops north of 10,000—and perhaps as high of 25,000 will remain in country for another decade.  At a cost of $1 million per year per troop, that remains a fairly significant commitment.

One can only hope that the fiscal cliff and the need for significant long-term spending cuts will create a moment when we can evaluate our Afghanistan policy with a clear head.

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One of the books I read this summer was Bryan Caplan’s Selfish Reasons to Have More Kids: Why Being a Great Parent Is Less Work and More Fun Than You Think. Having already read works like Judith Rich Harris’s excellent books The Nurture Assumption: Why Children Turn Out the Way They Do and No Two Alike: Human Nature and Human Individuality, I was not unfamiliar with much of the evidence Caplan adduces to support his thesis. And Caplan’s thesis is easy to state: A growing body of evidence suggests that the effect parents and their parenting style have on the kinds of people their children grow up to become is far less than they might have thought. Genes and peers seem to account for nearly ninety percent of children’s personalities as adults, which leaves a paltry ten percent for everything else, including accident, other environmental factors—and parents.

The moral Caplan draws is that parents should lighten up. If you are worried sick about your kids, about doing everything you can to make sure they lead good, happy lives, relax: Whether they lead such lives is largely not up to you, and little you do—beyond providing them the most basic nutrition—is going to make much difference.

Caplan also argues that if you took the long view of having children, focusing not only on the first two years of life, which are admittedly difficult, but on your whole life with your children, which includes the likely prospect of grandchildren, then you would see that the balance is decisively tipped in favor of having more children. A few years of difficulty is greatly outweighed by decades of pride, companionship, and love, and of course grandchildren are an almost unalloyed good. By contrast, the absence of children and grandchildren as one reaches one’s golden years can be a source of deep pain, regret, and loneliness. The lesson, then: There are good, rational, and selfish reasons to have more kids.

I highly recommend reading Caplan’s book: It is entertaining, lively, and provocative. But there are three things I believe Caplan missed.

First, Caplan argues that once a parent understands that he bears considerably less responsibility than he thought for what his children ultimately become, this can be a liberating realization enabling the parent to relax and have more fun with his kids. Perhaps that is true. But I think Caplan underestimates the extent to which this realization can also be dispiriting and dejecting. “Your efforts are unnecessary and largely pointless” does not strike me as an inspiring liberation. Imagine telling a priest, “Great news! We have now definitively proved that God does not exist. So now you don’t have to be as worried about saving people’s souls as you were before!” Okay, but the other side of that coin is that the proposition to which you have dedicated a substantial proportion of your life turns out to be false, and thus your efforts were pointless. Relaxing? Maybe, but perhaps just as likely depressing.

A second point relates to those “helicopter parents” whom Caplan particularly has in mind when he tells parents to relax. We all know the type: they schedule every minute of their children’s lives, drag them all over hell and gone for lessons and camps and enrichments, and worry, even obsess, about every little detail of their lives. The result, for both the parents and the children, is anxiety and frustration—and likely also disappointment when children inevitably fail to live up to their parents’ dreams and children perceive and even internalize their parents’ disappointment. Yes, such parents should surely take a deep breath.

On the other hand, it seems Caplan fails to realize that being helicopter parents is precisely what gives those parents’ lives meaning. That is their job. It is what gives them purpose, it is what gives them a sense of being needed, and its daily busy routine is precisely what gets them out of bed in the morning and keeps them going day after day. We may think they are making some kind of miscalculation, or engaging in ultimately irrational behavior, but that is only if we assume that the point of their behavior is only to gain some end to which their efforts are not likely to conduce. But their daily fretting and racing largely is the point; what it leads to is a secondary concern. So telling them to knock it off misunderstands what they are all about.

Third and finally. A thought I had recurringly throughout Caplan’s book was, “I’ll bet he doesn’t have teenagers yet.” And indeed he doesn’t. He has three kids, none yet a teenager. I am afraid to say that that explains a lot of his “just relax” attitude. Caplan substantially underestimates the difficulties and pain that the teenage years can cause, and the lasting effects that bad decisions of teenagers can, and lamentably often do, have. There is a sweet spot in parenting, when one’s kids are roughly four years old until they are about ten, when parents can think they’ve figured everything out. “Timeouts” work, children listen to their parents, a relative peace can reign. That often ends when children become teens.

Several times in Caplan’s book, he counsels parents of difficult pre-teens to “try a little discipline.” Timeouts work remarkably well, he tells them with only a hint of smugness. Yes, discipline, including timeouts, often does work—with pre-teens. Once a kid is ten, eleven, twelve, however, they don’t work. And what then? By the logic of Caplan’s own argument, the behaviors the kid will engage in are largely outside of the ability of the parents to control. Then that sweet spot is gone; all your theories about how great your parenting is, how cool and relaxed you are, all the relative peace and happiness that reigns in your family, can come crashing to a halt. What then?

Telling parents to “just relax” at that point is not only pointless, it can be inappropriate and even cruel. What if they also have pre-teen children and the teenager is effectively taking the whole family emotionally and psychologically hostage? This is the stuff sit-coms (not to mention reality TV shows) are made out of, so common and pervasive and intractable can the problems be.

I am not suggesting that all teenagers are terrible, or that the prospect of having children is no longer a good idea because children inevitably become teenagers. On the contrary, my own belief is that the tumultuous teenage years are part of the natural course of a family’s development, and in any case I reject the whole notion of doing cost/benefit analyses to determine whether one should have children. My point is instead that if one believes one should engage in that kind of cost/benefit reasoning—as Caplan’s argument presumes and recommends—then one has to take a full reckoning, which will include those potentially terrible teenage years. Will that tip the balance? I am not sure. But it would certainly make it far less obvious than Caplan seems to believe that selfish reasons to have more kids clearly outweighs reasons not to.

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An update to an earlier Pileus post: The woman who had submitted the ballot measure that would ban circumcision in Santa Monica has now withdrawn the measure (h/t: Roger Ream). The woman in question, one Jena Troutman, claims it had not occurred to her that there might be religious objection to her measure, especially from Jews, for whom circumcision is an important religious rite.

Ms. Troutman claims that, Jewish beliefs notwithstanding, her measure was “never about religion.” Now that she has seen that for many others it was indeed about religion, Ms. Troutman reflected upon their concerns, and decided to withdraw. Her respect for those whose beliefs differ from hers was evident in her thoughtful comments:

“I don’t have the time or the energy to argue with everybody, but you shouldn’t go around cutting up your little babies,” Troutman said. “Why don’t people [expletive] get that? For me, this was never about religion. It was about protecting babies from their parents not knowing that circumcision was started in America to end masturbation.”

If only everyone were as enlightened as Ms. Troutman. Until that happens, I suppose we will have to muddle along in a second-best world of religious liberty. Sigh.

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From Peter Ubel in Free Market Madness: Why Human Nature Is at Odds with Economics—And Why It Matters (Harvard Business Press, 2009):

The government could, theoretically, change the finances of the food industry enough to halt the obesity epidemic. [...] Given that information alone may not suffice to encourage better eating habits, policy makers should consider yet another approach to combat obesity—an approach that structures people’s choices in ways that will lead them to make better choices, not through incentives or coercion, but through emotional or even unconscious psychological forces. (pp. 214, 217-18)

Ubel is a “physician and behavioral scientist” at the University of Michigan. He is apparently unaware of the manifest difficulties with which the word “theoretically” is fraught in the first sentence above; he is likewise apparently unaware of the frightening implications of a medical doctor and behavioral scientist proposing that the government use “emotional or even unconscious psychological forces” to manipulate its citizenry into making what he or it deems “better choices.”

Perhaps someone should remind Dr. Ubel that such things have been tried with a fair amount of vigor and dispatch during the twentieth century; perhaps he would like to inquire into the results?

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Let’s suppose there are no natural rights, no right or wrong but what the law says – and the basic purpose of law is to preserve your own life. Let’s further suppose that chaos and constant warfare necessarily mark the absence of government, and that the more government there is, the less private crime there will be. In fact, some of these assumptions are probably wrong, but let’s stipulate them for the moment, for one could hardly come up with premises more likely to yield antilibertarian conclusions. After all, Thomas Hobbes built his entire justification of an absolute, authoritarian state on these assumptions.

Does an unlimited state protect the average person’s life better than a limited state? This is an empirical question that we need to refer to the evidence. (more…)

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Two recent stories in the WSJ dramatically illustrate once again that people respond to incentives. And taxes are incentives.

The first story suggests that one reason LeBron James might have chosen to go to Miami is to avoid the punitive taxes in the other places he was considering—especially Ohio and New York. The income tax rate in Ohio is just over 7%, and the rate in New York is set to become a whopping 12.85%. Florida’s income tax: zero. For someone about to make approximately $100 million in salary over the next five years, that amounts to a $7 million and a $12.85 million premium just for the privilege of living in Ohio or New York, respectively. I’m sure James’s first concern was basketball, but he’d be a fool not to consider these huge tax differences; and James is no fool.

Some Cleveland fans are pretty upset with James’s decision, pointing out that they were offering him $4 million per year more than what Miami offered. But even with that extra money, James would still end up about $1 million per year in the hole if he stayed in Ohio—solely because of the taxes. Some people in New York are suggesting that disappointed fans might direct some of their ire toward Albany, which has engineered the tremendous penalty for living in the state of New York.

The second story relates that with the federal estate tax set to resume at much higher rates as of January 1, 2011, people who are wealthy face the perverse and agonizing incentive of contemplating whether to commit suicide before the end of the year so that their heirs do not face a tax bill that could come to millions of dollars. As one 81-year-old Iowa businessman puts it: “You don’t know whether to commit suicide or just go on living and working.”

The tax disappeared in 2010, creating an incentive to live, but its return in 2011 is creating, as actual people in affected situations are putting it, a “death incentive.”

It is not exactly news that people respond to incentives, or that the tax structure creates a system of incentives in response to which people will alter their behavior. Just because a new tax being proposed does not affect you does not mean it affects no one. As William Graham Sumner argued, every dollar that the government raises through taxation is a dollar taken from someone, somewhere. You may not know the person from whom it is taken, and you may not care about him; he is effectively a “forgotten man.” But he labors under the burdens we place on him.

I suspect that some base motives are involved in our desire to tax the rich. When listening to people argue for such taxes, one often detects a faint whiff of—what is it? Is it envy and jealousy? Is it selfishness? Greed? These are not motives to be proud of. But let us not try to convince people to stop feeling these base instincts. Instead, let us remind ourselves that successful people make our lives much better. The spillover effects of successful people’s achievements come not from skimming ever larger portions of it and putting it in others’ pockets, but instead from the goods, services, and wealth they produce that we all, in turn, can enjoy.

People will always respond to incentives, so it is pointless to assume—as politicians and many in the public seem to do—that people’s behavior will not change no matter what the tax structure is. If you raise taxes on millionaires, they will go elsewhere; this has been proven over and over again.

These considerations lead me to suggest a different tack. Let’s put the fact that people respond to incentives to work for us, instead of working against it. If your state is struggling with its finances, consider, instead of raising taxes, lowering them the more people make. Perhaps institute a maximum threshold: once your income reaches a certain level, no taxes at all. If New Jersey, for example, did something like that, potentially thousands of disaffected wealthy people would flock there from the surrounding states, which would have all sorts of beneficial consequences. It might reverse New Jersey’s currently bleak demographic trends, and, given Laffer-esque effects of lower taxes, it might actually help it address its more-than-bleak fiscal situation.

That might also encourage us not to deepen social division by resenting those wealthier than we are, but rather to appreciate what they do for us and thus increase social cohesion and a sense of community. We might thus all be better off.

And—who knows?—we might even get a good basketball team.

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Is Network Neutrality a racist policy?  At least one prominent Chicago politician seems to think so. Cook County Commissioner Robert Steele recently voiced his objections to the FCC’s proposed regulatory attempts to achieve Net Neutrality. The principle of network neutrality asserts that broadband providers should not be able to block or limit use of their networks in order to impose a tiered service model of access, or to hinder competitors.

Steele sees net neutrality as furthering the interests of an “elitist agenda.” In his Huffington Post piece, Steele argues:

[T]here is very real concern among communities of color that the FCC’s planned “third way” for new regulations would discourage investment in sorely needed broadband infrastructure, stifle innovation, and kill job growth that stems from the wide availability of broadband services. Anyone can tell you that the current Internet we enjoy today was built on the investment of private companies, companies that provide jobs and companies that continue to build out the needed access to broadband infrastructure, both wireless and wired. While I would love to be able to tell you that the public sector has been able to invest just as much, that is unfortunately not the reality. Furthermore, we need to ask what do these government regulations really do for us in terms of increasing adoption of broadband technology, and also accessibility across America.

Steele goes on to argue that proponents of net neutrality rely

. . . on the assumption that without FCC oversight the internet providers would have “free rein to prioritize, block or slow access to content on the web.” These claims are boldly passed off as fact without recognizing the record on these matters — since the original four net neutrality principles were enacted in 2005, there have been only three instances that required intervention, and these isolated incidents were handled quickly and without much fanfare. As a matter of fact, in a decision by liberal Judge David Tatel, a three-judge panel of the D.C. Circuit of the U.S. Court of Appeals has come down on the side of those against further Net Neutrality regulations in the Comcast v. FCC case.

What is interesting about Steele’s position is that it recognizes the role of private investment in internet infrastructure. He also makes the connection between the regulatory barriers and the incentives for private investors to expand broadband access.

Proponents of ever more regulation often assume quiet compliance from minority and underprivileged communities, whose interests they either ignore or simply do not bother to understand. It is refreshing to see a grass roots politician thoughtfully question the benefits of regulation.

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The current catastrophe in the Gulf of Mexico is looking like a classic tragedy. It appears that BP and those who constructed the off-shore rig failed to meet acceptable standards in construction, warning and safety systems. In part this may have been a product of BP’s weighing of the costs and benefits, as suggested by an earlier memo ham-handedly thinking through the hedonic calculus via an analogy to the Three Little Pigs (See Rick Outzen’s piece in the Daily Beast).

The Minerals Management Service

Thankfully, regulators and inspectors at the Minerals Management Service were serving their duty as watchdogs watching porn on government computers, when they weren’t accepting gifts from the oil industry, dreaming of the revolving door, or hoping that the earlier evenings’ crystal meth wouldn’t cloud their judgment.

Meanwhile, it is good to know that the President—who seems remarkably disengaged from this situation—was able to find time to attend a fundraiser yesterday in California for Barbara Boxer.  Lisa Jackson, EPA Administrator, had the good sense to cancel a Manhattan fundraiser for Senate Democrats. One assumes the optics were bad. Luckily, this can be “hope and changed” with a symbolic presidential visit to Louisiana on Friday.

In any event, the effort to stop the tragic leak  via “top kill” is scheduled for today. Should one be optimistic? Apparently not. As the New York Times reports: “BP officials said the method of containing spills had never been tried so far underwater, and that it could take up to a few days to determine whether it had succeeded. They cautioned there was no guarantee that the gambit would work.”

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Crises (and yes, this has now become a crisis) are never self-interpreting. But I have a few quick thoughts.

Real world events always lead me to think that Stigler’s economic theory of regulation was too optimistic a portrayal of the underlying dynamics.  Elected officials seem to exhibit the depth and sophistication of Michael Scott (the character from the Office portrayed by Steve Carell) while regulators seem to exhibit the competence once would expect from the Three Stooges (if placed in the movie Brazil).  Corporations, while acting in their self-interest, rarely seem to act with enlightened self-interest.

I find it stunning and unacceptable that the oil industry can engage in deep sea extraction without having (1) a competent and exhaustive contingency plan; and (2) the equipment necessary to execute the plan ready for deployment. To begin consideration of how to deal with what appears to me to be a quite plausible event at this stage in the process is the height of arrogance.

Jason has made some postings about the precautionary principle that seem worthy of another read.  But here I want to focus on enlightened self-interest for a moment. Corporations work under what scholars commonly refer to as a regulatory warrant (i.e., what they are permitted to do under existing laws) and a social warrant (i.e., what they are permitted to do by the communities within which they are embedded). The social warrant can be very fragile, and thus self-interested firms must often go beyond what is required by regulations to nurture their reputations. Corporations must understand that, in many industries, they are “hostages of each other,” to use the title of an impressive book by Joseph Rees on nuclear industry self-regulation post Three Mile Island). Industry reputation is a collective good and a fragile good that can be easily destroyed by events like this. One would think that self-interested actors would recognize this and work collectively to develop coherent strategies for addressing these kinds of situations before they occur.

Tragically, if we can’t rely on the enlightened self-interest of corporations, the prudent and mature behavior of elected officials, and the competence of regulators, the crisis extends well beyond the events in the Gulf of Mexico.

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